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HUD / Down Payment Assistance programs -- DPA & Nehemiah -- Alive for a while....

By Jeff Belonger

Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

October 01, 2007 06:11 PM

hud Down Payment Assistance programs have been halted, but not dead as of yet. These programs have been known as DPA programs and are most used in conjunction with Nehemiah and AmeriDream®, Inc. There are other non-profit companies that have handled the DPA program, but these two are the largest. Personally I have always used Nehemiah and have found them very useful.

The word out on the street is that as of today, October 1st, 2007, these down payment assistance programs, DPA's, have been stopped. This would have severe implications on many FHA home buyers and even some conventional mortgages. Most of these buyers are first time homebuyers. There are over 1,000's of home buyers a year that have utilized this program. You wonder why anyone would even want to put a stop to this type of program. But are the DPA programs dead? Please read on.....

Here is one reason why HUD is semi against these DPA's. Meg Burns, who is the Director of the Office of Single Family Program Development for the Federal Housing Administration, known as FHA. states, "The core problem with these programs is not that the borrowers they serve are riskier or less credit-worthy; it's that the programs disrupt the natural negotiations between buyers and sellers in a way that results in inflated sales prices and thus higher mortgage amounts. Seller-funded down payment assistance programs flourish in weak real estate markets. In weak markets, low buyer demand means that sellers are less likely to get full asking price for their homes and are therefore willing to participate in programs that will help them sell for a higher price. As such, the property over valuation associated with seller-funded gift programs occurs in markets that are least able to adjust to and accommodate pricing variations." For more information on this new release that was released on July 22, 2007, please read News Release.

If you read the final rule by the Federal Register [PDF], as you can see, it's not issued by HUD. It usually takes HUD 2 to 3 days to release it's mortgagee letter on these types of topics that are applied to FHA and other housing issues. I have been speaking to both Nehemiah and HUD today. Here is the summary of what has taken place.

The HUD Rule has 3 major components:

Under the new rule, downpayments can't be derived from sellers directly or indirectly or any other party that benefits financially.
The rule takes effect on October 31, 2007 for all DPA providers except The Nehemiah Program.
Due to a 1998 legal settlement between Nehemiah and HUD, the effective date for the Nehemiah Program is March 31, 2008. The excerpt from the finale rule states:

"…pursuant to an April 1998 settlement agreement resolving litigation between the Nehemiah Progressive Housing Development Corporation (Nehemiah) and HUD, the effective date shall be March 31, 2008 for the Nehemiah downpayment assistance program described in the settlement agreement between Nehemiah and HUD."

Conclusion : Ignore the rumors that DPA's are dead or done with. Nehemiah is not dead, but other DPA programs could be dead. I have been told that Nehemiah can continue until March 31, 2008, but that all other Downpayment Assistance Programs have 30 days to close their transactions.

For any of you that want to support these Downpayment Assistance Programs, please contact your Congressperson and Senators to voice your concern about the elimination of these programs. Locate your elected officials by visiting http://www.takeaction.ahaanow.org/ahaa/home.

I have received a lot of phone calls and e-mails from AR members, realtors, and consumers about this Rule which has led to a rumor that this program is dead. I hope this clears the air for now.

______________________________________________________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert You can also go to this group : The FHA Mortgage Group

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

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Tim Bradford

Cleveland, OH

NMLS 250013

Recieved today from HUD. Looks like it is business as usual for the time being. Check the website of your favorite DPA Program to verify they are still active.

This is to notify you that FHA is not permitted to implement the downpayment assistance rule at this time. Judge Friedman of the United States District Court for the District of Columbia issued a ruling enjoining HUD from implementing the downpayment assistance rule, which was to go into effect today. This injunction is

applicable to everyone affected by the Rule. HUD will provide further guidance as appropriate.

To read the downpayment assistance rule (enjoined) in its entirety and for more information please visit: http://hudclips.org/sub_nonhud/cgi/pdf/4846a.pdf

Nov 01, 2007 05:34 AM

Ronald Miller

Monarch Mortgage - Fredericksburg, VA

Great Post Jeff,

I utilize the Nehemiah DPA in my every day business and marketing and truly find it to be asset to our industry. I do believe that Nehemiah will be victorious in the end as they were in 1998 there is just too much need for a program that assists people in acheiving the american dream of home ownership.

Nov 22, 2007 12:24 AM

Matthew Starr Longwell

Starr - Atlanta, GA

Really good timing for this one Jeff. I have been hearing this everywhere also. Some comentary was made some time back by FHA related to reform of DPA and as always you deliver the real information related to this subject.

Dec 20, 2007 03:43 PM

Mike Jones

SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ

Mike Jones NMLS 223495

Jeff,

Is there any update to this that would be worthy of a new post? Did FHA do this just to sharpen its own axe? I'll park here for your answer. Thanks.

Mike in Tucson

Jan 21, 2008 10:19 PM

Don Draughn - Mortgage Professional

High Point, NC

Mike,

I use these quite a bit and the last I heard is that March 31 is still the drop dead date but I would be interested in updates as well.

Jan 21, 2008 11:39 PM

Rick Kellow

Cherry Creek Mortgage - West Bend, WI

FHA & Reverse Mortgage Expert

Great post... I was also under the understanding that DPA's were a thing of the past... sorry I was wrong... I have had some difficultly with some lenders not willing to work with DPA's... any thoughts

Rick

Jan 29, 2008 01:25 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Sorry for not getting back to many of you..... not ignoring anyone, just been busy and trying to keep up with comments.

ROB.... thanks for the compliments and for the kind words.

KATUMBA..... I am not familiar with your area at all. I know many in some areas, that the rental market has boomed. In New Jersey, in many areas, it can be cheaper to rent than to own, depending on what you want.

My argument to what you stated would be this. You talk about how these DPA programs can be very good for those that can't save, because everything keeps going up. But you even pointed out to me that the average person's debt to income ratio is a 42% without taxes and homeowners. In all honesty, any program is irrelevant if they can't qualify. Hence why so many stated loan programs took a big hit. Too many people were qualified with false income, when in reality, they weren't going to be able to afford that property.

Foreclosures -- What are the causes of foreclosures? Part of my point in this post is about why people can't pay their mortgages and it's not all about higher rates in many cases. Yes, it hurts some. But getting back to your comment. You hit the nail on the head, people's income is a lot lower than home prices. Even if you could get people into a house with no money down, how would they qualify? The market needs to correct itself. Home prices need to come back down to fit the mold of the average consumer. Or, in many cases, the average consumer needs to make more... or unfortunately, get a 2nd job. These are just my opinions, but I am seeing more and more of this as people come out to buy. They just don't have the income to buy what they want to buy... or because of a general market as yours, can't afford even those average homes. The market out-priced itself.

DAVID.... I am deleting your comment, because you are selling a product in my thread. Not too many appreciate this. If you have thoughtful or thought provoking feedback, that's fine. thank you...

TIM.... I haven't followed up with Ameri Dream since then and even now. I have only used Nehemiah and besides, Nehemiah is good until the end of March, as opposed to AmeriDream going until end of February.

SHAWNA.... first off, my statements to why DPA's have been pushed to the side per se.. There are two sides to everything. Yes, the tax issue has been a concern and issue from the lenders perspective. But if you talk to underwirters and such, they all don't like DPA's because of the abuse and default rate also. It's called politics and discrimination. Yes, it's a tax issue on the outside, but do you truly believe all of that? If lenders said it was because of defaults and such, that they could be liable for a discrimination suit? Just trying to point out both sides of things. I talk to people behind the scenes to get some of my answers and not what is written in the paper.

In regards to conventional loans still being better for the client? That people don't want to accept FHA offers, etc etc. I don't have a problem with you feeling comfortable with putting a deal into the DU system to get an approval. But even back in June, I wrote a post showing a 97% conventional, compared to a FHA loan and the FHA won. The payments were lower. Numbers don't lie, do they? I just wrote this yesterday. FHA mortgages vs Conventional mortgages - A True Comparison and why, especially now, more than ever, why FHA is better. I state the reasons why in here. FHA mortgages are better than conventional mortgages -- Why is that?

Can you honestly tell me that conventional is now and still better than FHA? I closed a client back in August of '07 that was approved by a lender on a level III. By going FHA with the money down, I saved the gentleman over $260 a month in payments, with a much lower rate. In my honest opinion, conventional loans are better for some loan officers, because if it says approved / eligible, their job is done for the most part. Probably about 90% of all FHA loans come back referred / eligible. Which means the loan officer needs to know how to put a good file together. They need to truly understand credit, income, and most of all, compensating factors. The reason why so many don't like taking FHA offers is because we, the loan officers, don't properly educate the realtor and the consumer.

Now, these are just my opinions... but anytime someone tells me that conventional is better, and we go over their scenario, 9 out of 10 times, the FHA way is actually cheaper. Again, all I have to fall back on are actual numbers, comparing apples to apples. Just as I did in the FHA vs Conventional comparison. Hence why some fight this, when they don't even do FHA or are FHA approved. How can you truly understand something that you don't have? And passing them onto your friend? Maybe he is just not aggressive enough or their company. I just got a FHA loan approved that another lender denied as a FHA loan. They didn't go through the credit with a fine toothed comb. It took me 2 weeks to help with his credit, because I knew the circumstances. Would love your feedback on this.

TIM.... thanks for the link. I will take a look at it later. thanks

RONALD...... thanks for the compliment. I truly believe that you need to understand FHA & Nehemiah, on how both work, the market, and how to sell in this market. There seem to be so many narrow minded people that don't think outside the box. If a home is properly marketed with it's true value, we know 7 out of 10 times, the selling will end up taking 94% to 96% of the offer. This can then leave the buyer with 6% to 4% to use for the down payment and closing costs. It's now like doing 100% financing, which are limited to 3% seller help. And FHA only requires 2.25% down most times. If I received 5.25% in seller help then, then it's just like the conventional 100% financing.... after that, it's a no brainer, because the FHA will be much lower in payment by several hundreds of dollars. When people still fight me on this issue, it just shows me that they actually don't have FHA as an outlet. This is about 80% of the time.

MATTHEW S. ..... thanks for your feedback and for stopping by.... and for the polite compliment.

MIKE J. ..... I am really not sure. FHA still hasn't come out with a 100% program and from how it looks, they won't. And HUD knows damn well that they will lose about 5% of the market share if they don't allow DPA programs. If I had to bet on this one, I bet that this gets extended or lifted. I am going to follow up with an inside contact per se. We talked about the max loan limits yesterday, but I never touched base on this. thanks

DON...... as I told Mike, I am not sure... but as a business person, I couldn't see them dropping this program. It's money in everyone's pocket. But again, when politics gets involved, they try to control or oust people or things. I guess time will tell.

Buyers account... I deleted your links... you didn't offer anything but your link. Please don't leave your links in here, as it is a form of advertising. thank you.

RICK..... my pleasure. And as of now, no, several are still around until the end of March, 2008. Will they be around after that date? I hope so, unless FHA comes out with a 100% program. Besides, out of all our FHA business, about 10% of them are DPA's. We underwrite our own FHA loans in-house, so we don't have any problems with them. And the investors that we sell these to after closing don't have a problem with them. Which investors are you having problems with?

Jan 29, 2008 02:52 AM

Anonymous

Glad I found this Blog!

My husband and I are first time home buyers, hoping to jump into the market when prices fall a little further. A friend of mine is getting a house, while using the HART DPA program. So, I guess these programs are still up and running? We were hoping to watch prices through the summer, but we need DPA (especially here in Southern CA).

Can you tell me what this means? I found it on the HART site.

Enjoinment Prohibits Implementation of Downpayment Assistance Rule

Thanks!

Paige

Feb 07, 2008 06:53 AM

#77

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Paige..... it might mean that HUD will not allow FHA to work with that particular company, period. There were 100's of DPA companies out there, offering the same. But I only know a few that are allowed to continue.

Now, in regards to your comment, about waiting until this summer. I would not advise this for two reasons. One main one is, as to date, HUD will not allow these DPA's to close beyond March 31, 2008. So, if they fail after that date, you won't be able to buy a house like this anyhow. And on the conventional side, many MI companies are doing away with 100% financing.

Secondly, rates are very low now. Why take that risk in 4 months, hoping that prices comes down. If the price of a home drops $15,000, but the rate goes up 1/2%??? Your payment would be only better by $15 to $20 on the lower priced house with a higher payment.

My whole point that I tell buyers... if you are ready to buy now, but you want to wait 6 months, then you really weren't serious to begin with. ... just my opinion. But it's never been better to buy now. Besides, have you even talked to a loan officer to see what you can do? Or just assuming? Because I have had 3 clients that went with a large mortgage bank, a national company... all 3 were told they could buy x,y,z... and said differently and not one closed. I have gotten two of them approved now, but after some work. Each person is different. Just a FYI

Feb 12, 2008 01:24 PM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Now... I am copying what this person just said above Paiges comment.....and I am deleting his comment, because he leads you to HIS website from my blog... and his information is very mislead. Here was his comment...

So much has happened since this blog was posted,

please feel free to see my latest on the subject

http://...... I am leaving this blank because his site is misleading. Please read below for an excerpt from his site and maybe you will understand.

Thanks,

Marlo

02/12/2008 08:27 PM

by Marlo _____________

Delete Report as Spam

Excerpt from Marlo's site.....

Fact #1:

Today, the new banking environment has almost eliminated all 100% loan programs. The few remaining require exceptional credit scores and are priced anywhere from .25 to 2 points higher than a loan with a down payment.

Here is my comment to him and I hope he debates me on this and proves to me otherwise.

Eliminated close to 100% and then go on to say that the remaining require exceptional credit scores???? WRONG... we underwrite the loans, not the DPA companies... so your statement is 110% false. I won't even get into your other statements, because this is the only one that I need to make my point. Your self-promotional stuff aggravates me. Overall, I have been doing this for 15 years and I HATE people that mislead the general public. Period....

Feb 12, 2008 01:29 PM

Marlo Newman

W.J. Bradley Mortgage Capital - Scottsdale, AZ

Marlo Newman Mortgage Banker 480-326-9858

Hi Jeff, I found the post you are referring to and it's here.

Regarding a debate...

I'll leave that up to the candidates but if I can add to a friendly discussion in the hopes that we both can help more clients, I'm all for it :)

First lets address paiges post and your excellent response

>>>Lets move this paragraph for the bottom and I'll be happy to explain what it means but it does not in my opinion change the advice for Paige which you are entirely correct and on target with.

You wrote to Paige:

>>>Paige what Jeff has mentioned about Seller Funded DPA's being gone after March 30th 2008 is still a very real possability and if you do not have any other to acquire the funds you would need for a down payment it may not be worth the risk of losing that possability. Jeff is right take advantage of the programs while you know for sure you can!

No in regard to:

Enjoinment Prohibits Implementation of Downpayment Assistance Rule
This is to notify you that FHA is not permitted to implement the downpayment assistance rule at this time. Judge Friedman of the United States District Court for the District of Columbia issued a ruling enjoining HUD from implementing the downpayment assistance rule, which was to go into effect Oct. 31, 2007. This injunction is applicable to everyone affected by the Rule. HUD will provide further guidance as appropriate.

What this means as of Feb 12 2008 is this.

Hud had initiated a proposed rule change that was suppose to take effect on October 31st that would have eliminated all seller funded Down Payment Assistance Programs. The leaders in the industry filed a lawsuit against HUD for a variety of reasons.

Judge Friedman at the time decided that he did not have sufficent time to review the matter and ruled that HUD was not allowed to implement the rule change until he decided if it was legal for them to do so.

here is a link to that order

He stated that he would publish his final decision before March 30th 2008

These are the facts...

Now the speculation can begin :)

Most people involved with the case feel that the Judge will rule in the DPA's favor and the status quo will continue.

Others heve been working on other solutions to allow certain types of DPA's to continue to exist in other iterations.

Additionally, new solutions have been introduced to the marketplace that are not Down Payment Assistance programs but are Down Payment Solutions.

How this all plays out will be decided over the next 30-60 days and there are other moving parts that make it difficult to predict.

I believe that DPA's will survive and other solutions will be succesful in the marketplace despite the push back that many banks have towards these programs.

But from a consumers prospective, my advice would be to go get a house while you know you can for sure.

Best of luck

Marlo

PS. I'll be happy to address the different speculations and solutions in a different blog

Feb 12, 2008 03:56 PM

Greg Myers

G L Myers Real Estate Services - Chapel Hill, NC

With the information out today on the Fannie/Freddie agreement that will alter the way appraisals are ordered throughout the industry (the official press release has links at the bottom for the agreements) and the new code of conduct for Home Valuation, I think most of my objections to DPAs are addressed. Since the people putting the deal together have no say in who does the appraisal, an honest valuation is much more likely. With an end to shopping for an appraiser, target values and other such nonsense that affect the industry today, such deals that go through are much more likely to be the truly desperate seller looking to unload the house they should have placed on the market months earlier than they did.

Mar 03, 2008 12:31 PM

Marlo Newman

W.J. Bradley Mortgage Capital - Scottsdale, AZ

Marlo Newman Mortgage Banker 480-326-9858

E-mail received today from Nehemiah

Dear Colleague,

I am pleased to announce that Nehemiah was victorious in its litigation against HUD!

Judge Lawrence K. Karlton of the United States District Court for the Eastern District of California upheld Nehemiah's motion for summary judgment. The Court Clerk's Office is directed to enter judgment and close the case.

To be clear, the U.S. Department of Housing and Urban Development's (HUD) rule to ban private downpayment assistance as proposed in the Standards for Mortgagors Investment in Mortgaged Property regulation published October 1, 2007, is permanently set aside.

We are thrilled with the Court's decision to support low-to-moderate income families across the country by ruling against HUD?s attempt to ban private downpayment assistance. This is a major and conclusive judgment, leaving no uncertainty that downpayment assistance is a life line to the families that Nehemiah serves. It is heartening to see that the Court's arguments echo our sentiments and concerns. This decision preserves access and supports the use of sensible and reasonable approaches to homeownership for millions of working class families. It is a privilege to continue providing a helping hand to America?s underserved families by building both safer communities and financial strength through homeownership. As we have said before, we look forward to working with HUD to support deserving families across the country.

Since May 2007, Nehemiah has led the fight against this controversial rule. Since it was announced, there has been confusion throughout the industry regarding the potential impact of this rule. As the DPA industry leader, Nehemiah took seriously our responsibility to provide you with timely, accurate and responsible information about the events and activities surrounding this issue.

We took action by educating influential people and organizations regarding the truth about downpayment assistance. We asked for our homebuyers and industry partners to help us by voicing their support and the response has been overwhelming. I want to thank each of you for your letters, phone calls and spoken support of Nehemiah throughout this unfortunate situation. Your support has helped raise awareness in Washington D.C. which has increased the dialogue regarding DPA regulation though legislation. We hope to see some positive congressional developments aimed preserving the option of private downpayment assistance for homebuyers. Currently, the Senate is contemplating FHA Reform legislation that will determine the fate of private downpayment assistance programs. Please help us one more time by contacting your Senators to convey your support for downpayment assistance; a very important vote is expected in the next few weeks.

As a reminder, we provide a section on our website called Regulatory Updates where we detail significant issues relating to DPA regulatory and legislative events. Check back for new postings or sign-up to have accurate and timely information delivered to you.

On behalf of the entire Nehemiah team, we look forward to providing you with the same unmatched quality you have come to expect from us for years to come.

Sincerely,

Scott Syphax
President & CEO
Nehemiah Corporation of America

Mar 03, 2008 12:46 PM

Anonymous

Willis Eubanks

Jeff...I found most of the information on this website very helpful. Thank you

My firm does a lot of FHA loans inconjuction with DPA programs such as AmeriDream and Nehemiah, which are two our favorite programs with FHA loans. Has anyone ever used a DPA program in particular AmeriDream or Nehemiah with an conventional lending such as MyCommunity, Home Possible, etc?

Any help/assistance would greatly be appreciated.

-Sincerely, Willis Eubanks

First Home Mortgage, Greenbelt, MD

Mar 04, 2008 10:13 AM

#83

Craig Tone

DMZ Mortgage - Seal Beach, CA

Seller funded DPA survived after all!

May 28, 2008 04:12 PM

Marc DeSantis

Countrywide Home Loans - Happy Valley, OR

I'm using Ameridream for a June loan. Hopefully the program sticks around for awhile.

May 28, 2008 06:56 PM

Anonymous

Update 08/13/2008
Nehemiah Corporation of America announced the launch of www.DPAGroundSwell.org, a web-based community established to mobilize the growing industry opposition to the October 1 ban on seller-funded downpayment assistance (SF-DPA).

This site enables visitors to directly contact local representatives and offer support for a bill introduced by Representatives Maxine Waters, Gary Miller, Al Green and Christopher Shays on July 31, 2008, that would reinstate SF-DPA. If passed and signed into law, the FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 (H.R. 6694) will allow downpayment assistance to continue indefinitely.

Aug 14, 2008 03:32 AM

#86

Anonymous

jerry

I want to buy files a house the hood foreclosed house with no qualifying and no down it Victorville California

Aug 18, 2008 02:02 PM

#87

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

JERRY.... You wrote this..."want to buy files a house the hood foreclosed house with no qualifying and no down it Victorville California"

Sorry, but you semi lost me on what you were trying to say. Thanks

Aug 18, 2008 02:07 PM

Rob Robinson- Lehigh Valley PA

Bertrum Settlements (Title & Abstract) - Allentown, PA

Ummm.......wanna buy a house in da hood? :^)

Dude...we have to hook up.

Aug 18, 2008 05:37 PM

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HUD / Down Payment Assistance programs -- DPA & Nehemiah -- Alive for a while....

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Enjoinment Prohibits Implementation of Downpayment Assistance Rule

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